UPDATE, 7:30 AM: Speaking at the House of Commons, Prime Minister David Cameron said he accepts the “principles” of recommendations made by the Leveson Inquiry into UK press reform. But, he said he has “some serious concerns and misgivings” on supporting legislation to underpin an independent self-regulatory body to oversee the industry. “We should be very wary of any legislation that has the potential to infringe” on a free press, he said. “The danger is that it would create a vehicle for politicians to impose regulations and obligations on the press.” Cameron was asked whether a new watchdog could “prevent a newspaper group simply walking away or ignoring the new body’s findings” without statutory underpinning. Cameron returned that “Lord Justice Leveson does not himself have an answer to that question.” Cameron is starting cross-party talks on the report, but urged that the implementation of many of the recommendations can begin immediately. He also noted that there were many allegations made in both the House of Commons and at the inquiry in the past year that his Conservative party “struck a deal” with News International, but that the report finds there was no such deal. Cameron said those who made the allegation should now withdraw it.

BREAKING: As part of the findings of his 16-month inquiry into UK media ethics (read the full report here), Lord Justice Brian Leveson writes, “Most responsible corporate entities would be appalled that employees were or could be involved in the commission of crime in order to further their business. Not so at the News Of The World.” The comment refers to the now-shuttered tabloid that was owned by Rupert Murdoch’s News Corp and whose troubles were the reason Prime Minister David Cameron convened the Leveson Inquiry in July 2011. Since then, the hearings have probed the relationships between the press and the government, the police and the public over nine months of oral testimony from 337 individuals.

In a statement today, Leveson said, “Free press in a democracy holds power to account, but with a few honorable exceptions, the UK press has not performed that vital role in the case of its own power.” As expected — and as a means to ensure that something like the phone-hacking scandal is not repeated — Leveson then recommended the creation of a new, independent self-regulatory body to oversee the press. The board would have the power to establish its own remedial action for breach of standards and should be allowed to impose financial sanctions, up to £1M. Leveson warned that should newspapers fail to establish this new scheme, it should fall to the government to pursue and could require Ofcom to act as a “backstop regulator.”

Although Leveson said the proposals were for independent and not “statutory regulation of the press,” the “backstop regulator” section is likely to rankle members of the British press who have feared any kind of legislative interference in their business. News Corp.’s News International had been silent on the matter up to yesterday, when CEO Tom Mockridge told the BBC, “The people who argue for state regulation are saying they are going to trust the politicians in this country for another 300 years not to exploit that. That is a trust too far.”

Leveson refrained from criticizing individuals in the report but did point to the relationship between a News Corp lobbyist and the office of then-Culture Minister Jeremy Hunt during the BSkyB bid process. Saying the bid was “commendably handled” in “every respect bar one”, Leveson noted a “hidden problem, which, had the bid ultimately gone through and that problem come out, would have had the potential to jeopardize it altogether.” During the inquiry, exchanges between Hunt’s office and the News Corp lobbyist were revealed, leading Leveson to conclude there was “a perception of bias” in the process.

Cameron and Deputy Prime Minister Nick Clegg will make separate statements on the findings this afternoon in the House of Commons. Two statements mean the politicians were unable to agree on a unified response after reading the report during a 24-hour advance window. But aides from Clegg’s Liberal Democrats party say the decision does not represent “a massive split or disagreement” within the coalition government.

Cameron runs the risk of alienating media allies and phone-hacking victims if he leans too far toward legislating press reform. But, as the person who set up the inquiry which at last count cost taxpayers $6.4M, he has said he would abide by Leveson’s findings as long as they were reasonable.